Procedure for calibrating engine temperature gauge
Dmitry, sounds like your coolant sensor and gauge are certainly out of whack! Actually, it's a good idea for everyone to occasionally check gauge accuracy since these meter movement mechanisms can easily go 'off' with time. Below is my procedure for calibrating the coolant temperature gauge and sensor. The specific locations and values apply to a W124 with a 103 engine. Since you probably have the first year of the 104 engine on your 300CE you may need to adapt them to your particular engine.
1) locate the coolant temperature gauge sensor. There are several engine temperature sensors so be sure to get the correct one. On the 103 engine it is located on the cylinder head, second sensor from the rear and has a single-pole connector. You can verify the correct sensor by pulling the connector when the engine has warmed up - the gauge display will drop out of range on the low side.
2) measure resistance at the sensor when the engine reaches operating temperature. For example, on a 124/103 the resistance will be 63 ohms (+/- 2) at an operating temperature of 80C IF the gauge is accurate and the sensor is good. If you want to measure resistance at a different temperature or if the sensor is different on the 124/104 then let me know and I'll calculate the appropriate values for you. (Btw, I suspect that the resistance value posted by JimF are for one of the other sensors?)
3) if your gauge shows a large discrepancy between sensor resistance and the ideal value you will need to either reset the meter pointer or at least make a mental adjustment. (It's possible that you inadvertently stretched the pointer when you were working on your instrument gauges.)
Hope this helps,